Banks

American banks prepare for economic downturn

Summary

Why banks may be on the verge of collapse…and we could go into a deep recession: Former FDIC Chair Description video: Volcker Alliance Director and former Federal Deposit Insurance Corp. Chair Sheila Bair joins the On the Move panel to […]

Why banks may be on the verge of collapse…and we could go into a deep recession: Former FDIC Chair

Description video:
Volcker Alliance Director and former Federal Deposit Insurance Corp. Chair Sheila Bair joins the On the Move panel to discuss the risk of collateralized loan obligations and the health of the banking industry.\n#bankingstocks #Bankingcollapse #FDIC\r\n\nThis segment originally aired on July 22, 2020.\nSubscribe to Yahoo Finance: https://yhoo.it/2fGu5Bb\r\n\r\nAbout Yahoo Finance: \r\nAt Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financial life.\r\n\r\nConnect with Yahoo Finance:\r\nGet the latest news: https://yhoo.it/2fGu5Bb\r\nFind Yahoo Finance on Facebook: http://bit.ly/2A9u5Zq\r\nFollow Yahoo Finance on Twitter: http://bit.ly/2LMgloP\r\nFollow Yahoo Finance on Instagram: http://bit.ly/2LOpNYz

American banks prepare for economic downturn

Major US banks may start earnings season on a minor note due to falling interest rates, which could put pressure on NIMs, thereby causing lower earnings per share.

While the strengths of mortgage banking and low cost could support the S&P 500, its effectiveness depends on what guarantees the managers provide on credit terms, the prospects for lending growth and their ability to reduce deposit costs.

This week the results for the third quarter were reported by Citigroup Inc, Wells Fargo and Co, JPMorgan Chase & Co and Goldman Sachs.

Major US banks report 1.2% decline in profits, while revenue grows 0.9% on average. 

«This will be a pretty tough quarter due to the net interest rate.», – said Fred Cannon, director of research at Keefe, Bruyette & Woods in New York, citing smoothing and temporal inversion of the U.S. Treasury yield curve.

Banks’ profit is largely dependent on net interest income or the difference between the rate they charge for long-term loans and the rate they pay for short-term borrowings.

Executives at Citi, Wells Fargo and JPMorgan cut their full-year net interest income forecasts last month, citing macroeconomic concerns.

Part of the problem is the Fed’s interest rate cut in July and September. At the same time, futures traders predict a further rate cut in October.

Investors are on high alert for signs of slowing economic growth, hurting debt repayment, said Mike Cronin, investment manager at Aberdeen Standard Investments..

American banks prepare for economic downturn